|
on Resource Economics |
| By: | Thomas Douenne; Sebastian Dyrda; Albert Jan Hummel; Marcelo Pedroni |
| Abstract: | How should governments design climate policies in the presence of inequality, uninsurable risk, and fiscal constraints? To address this question, we develop a climate--economy model with incomplete markets and idiosyncratic labor-income risk, where Ricardian equivalence fails and optimal long-run capital taxes are positive, leading to important inter-temporal wedges. We analytically show that the optimal carbon tax equals the social cost of carbon (SCC) adjusted for fiscal distortions. Calibrating the model to the U.S., we show that these adjustments are quantitatively negligible: high levels of household inequality, income risk, and fiscal distortions do not, in themselves, justify lowering climate ambitions. Welfare gains under the optimal policy come almost entirely from efficiency and environmental amenities, with almost no effect on redistribution and insurance, and are fairly evenly distributed across households. |
| Keywords: | Climate policy; Carbon taxes; Optimal taxation; Heterogeneous agents; Incomplete markets; Inequality and risk. |
| JEL: | E62 H21 H23 Q5 D52 |
| Date: | 2025–11–10 |
| URL: | https://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-807 |
| By: | Koetter, Michael; Popov, Alexander |
| Abstract: | Exploiting three decades of detailed regional data for Germany, we find that when the Green Party is successful at the polls, local hazardous emissions decline. The level of political representation matters, too. Green politicians’ gaining influence at county level is followed largely by a decline in air pollutants that have an immediate adverse health effect. In contrast, when the Green party joins the state government, only greenhouse gas emissions that affect the welfare of future generations via climate change decline. The primary mechanism to achieve lower emissions appears to be a reduction in output, rather than more efficient energy use. JEL Classification: D72, Q53 |
| Keywords: | elections, growth, hazardous emissions |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253155 |
| By: | Silvia Leoni; Marco Catola |
| Abstract: | The debate on environmental policy increasingly focuses on aligning private incentives with social objectives in imperfectly competitive markets. While traditional literature has centred on public-based mechanisms like taxes and subsidies, a growing strand emphasizes private-based mechanisms, particularly green consumerism, where consumer preferences can drive firms’ adoption of clean technologies. Recent game-theoretic analysis shows that consumers’ willingness-to-pay can lead to various market equilibria, from all-green to all-brown outcomes. This paper complements this analytical approach by developing an agent-based model (ABM) to study the dynamic evolution of a spatial market where firms, based on relative performance, decide whether to supply brown or green products to heterogeneous consumers. Our computational simulations confirm that all three market structures—all-brown, all-green, and mixed—can endogenously emerge depending on average green consumer preferences. Furthermore, we evaluate the effectiveness of three policy instruments: an environmental tax, a subsidy to green firms, and a subsidy to green consumers. We find that supply-side policies are more effective than demand-side subsidies. Specifically, an environmental tax ensures the fastest convergence to an all-green market, while a production subsidy is most effective at reducing the share of brown firms and consumers in mixed-market scenarios. By bridging game-theoretic insights with agent-based computational analysis, this paper provides a dynamic and policy-relevant perspective on the transition to sustainable markets. |
| Keywords: | agent-based modelling, pollution abatement, green technology, environmental policy |
| JEL: | C63 D43 H23 L13 L51 |
| Date: | 2025–11–01 |
| URL: | https://d.repec.org/n?u=RePEc:pie:dsedps:2025/326 |
| By: | Dong, Zeyang; Liang, Jing; Linn, Joshua (Resources for the Future); Qiu, Yueming |
| Abstract: | Many jurisdictions encourage households to adopt technologies that reduce greenhouse gas emissions and energy consumption, but there is little evidence on how these technologies affect the welfare of nonadopting households. We show that, in theory, adopting climate-friendly technologies that affect aggregate electricity demand, such as rooftop solar photovoltaics or electric vehicles, can increase or decrease average retail electricity prices in the short run; if the variable cost curve for electricity generation is sufficiently flat, higher demand reduces prices (and vice versa). Analysis of US residential electricity price and consumption data, as well as simulations of a computational electricity generation model, suggests that this variable cost condition holds. Adopting technologies that reduce consumption raises average retail prices, harming nonadopters; adopting technologies that increase electricity demand reduces average electricity prices, benefiting nonadopters. Using household survey data, we find that adopting rooftop solar disproportionately harms low-income nonadopting households, whereas adopting electric vehicles disproportionately benefits them. This progressivity roughly offsets the regressivity of the electric vehicle subsidy transfers. |
| Date: | 2025–11–12 |
| URL: | https://d.repec.org/n?u=RePEc:rff:dpaper:dp-25-28 |
| By: | Oscar Claveria (AQR-IREA, University of Barcelona); Petar Soric (University of Zagreb) |
| Abstract: | Recent energy tensions caused by conflicts in Ukraine and the Middle East have added to the pressure that global warming exerts for an energy transition towards low-carbon energy sources. This study combines two time series approaches with the aim of delving deeper into the relationship between environmental degradation and economic growth and to test the environmental Kuznets curve (EKC) hypothesis, using information from 20 European countries between 2007 and 2021. Overall, the obtained results suggest the existence of a N-shaped nexus between emissions and income per capita. Additionally, we evaluated stability of this nexus and the potential existence of an asymmetric adjustment. In most countries we find asymmetries in the adjustment of emissions to positive and negative changes in income, but not so much in economic complexity. However, notable differences are observed between countries, which could be indicating their differentiated phase in the EKC curve |
| Keywords: | economic growth; economic complexity; environmental degradation; greenhouse gas emissions; Europe JEL classification: C38; C55; O44; Q20; Q50 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:aqr:wpaper:202509 |